When the actual rate of inflation is less than the expected rate,
A)the unemployment rate will temporarily rise.
B)firms will increase their output to recoup their falling profits.
C)the unemployment rate will temporarily fall.
D)firms will experience rising profits and thus increase their employment.

Question

Quizplus · Accepted Answer

When the actual rate of inflation is less than expected, firms may find that their costs are higher than anticipated relative to prices, leading to reduced output and potentially higher unemployment.

When the Actual Rate of Inflation Is Less Than the Expected